Environmental Due Diligence of Real Estate Transactions

The Sherman Law Firm represents buyers and sellers of contaminated property. Under New Jersey environmental laws, unless a purchaser of property conducts a Preliminary Assessment report (PAR) and, if warranted, a Site Investigation Report (SIR), prior to the closing of title, then the purchaser will be jointly and severally liable along with the polluter and the previous owner for the environmental clean-up costs and liabilities to third parties and the NJDEP. However, a purchaser who conducts proper environmental due diligence of the real estate transaction prior to closing receives the following benefits:

  • “innocent purchaser” defenses to claims of third parties, such as adjoining property owners, for environmental remediation costs;
  • Defenses against NJDEP enforcement;
  • Eligibility to recover up to 75% of any environmental clean up costs for qualifying “brownfields” properties;
  • Eligibility for New Jersey Economic Development Authority (EDA) low-cost up-front bridge loan money to pay for environmental clean-up costs.

Many banks and other commercial lenders use ASTM Phase 1 Environmental Site Assessment Reports (ESAs) to screen the environmental risks of specific loans. However, a Phase 1 Report is insufficient under the NJDEP Technical Regulation.

Superfund Liabilities and Environmental Due Diligence under the Federal All Appropriate Inquiry Rule

In certain cases where a federal interest and potential CERCLA (Superfund) liabilities may be present, purchasers of contaminated property will need to comply with the USEPA federal “all appropriate inquiry” rule 70 F.R. No. 210 at

p. 66070 (November 1, 2005 Final Rule). Environmental Due Diligence conducted in accordance with the federal all appropriate inquiry rule will entitle the purchaser of contaminated property with the following significant legal benefits:

  • “good faith prospective purchaser” defense against undiscovered liabilities;
  • “innocent landowner” defense against the acts and omissions of third parties causing contamination on the property, e.g., tank contractor;
  • “contiguous property owner” defense to the claims of off-site property owners making personal injury or property damage claims related to migrating groundwater plumes or soil vapor clouds.

The Sherman Law Firm LLC
92 Park Street
Montclair, New Jersey 07042
Telephone 973-783-0284
Facsimile 973-783-0285
Email
www.theshermanlawfirm.com

© 2006 The Sherman Law Firm LLC.
All Rights Reserved.